It’s A Quiet Start To End A Busy Week For Markets Around The World

It’s a quiet start to end a busy week for markets around the world with equity and energy prices showing small losses in the early going after a strong Thursday rally that pushed US stock indices to all-time highs.

If RBOB prices stay in the red today, it will snap a 7 day streak that added more than 21 cents to the October contract after it started the month by dropping 22 cents. ULSD prices have taken back 13 cents after reaching a multi-year low last week, but still need to add another 8 cents to erase the early September losses. While the bounce off of multi-year lows has been noteworthy, there’s still more work to be done to break the longer-term downtrends that continue to threaten even lower prices before year end.

Adding to the bullish sentiment Thursday was a statement from the Saudi crown prince who said the kingdom would not recognize Israel without a Palestinian state. Saudi Arabia’s abstinence from the conflict over the past year, compared to its leading role 50 years ago, had been a major reason why oil and other fuel prices have barely shrugged over the past year compared to the 300% increase during the oil embargo of the early 70s which spawned year-round daylight savings and a national speed limit of 55mph. Of course Saud Arabia’s conflict with Iran and its Houthi-rebel proxy forces over the past decade make a repeat of those embargos unlikely, but any suggestion that the Saudis may change their stance has the potential for large impacts on oil prices.

Just days after Chinese courts declared two refineries bankrupt, a brand new refinery built on a man-made island off the country’s east coast has opened for business. That facility is one of a dozen or so new refineries being built in China and India that many believe will be the world’s last wave of construction ever as new fuels will replace oil eventually. Given that essentially all refineries in the US are at least 60 years old, it’s an easy argument to make. The influx of new refining capacity over the past 2 years is playing a major role in the collapse in refining margins in most regions, and is expected to put more facilities out of business in the coming years, similar to the announcement last week from Scottland’s only refinery.

There’s still a threat of a hurricane getting into the Gulf of Mexico late next week. The NHC is still giving 40% odds of a system being named, while Accuweather forecasters show a legitimate chance that this system could develop rapidly once it hits warm water, and has the potential to head for refinery row.